The Confederation of British Industry retail sales index strengthened as forecasted to 37 in June, up from -50 previously and in line with consensus forecasts. Retailers surveyed were pessimistic over the outlook with the July figures forecasted to be at -48. Most retailers expect sales to lag well below where they were this time last year and stock levels also remain high, increasing the need to reduce inventory. Sterling managed limited progress before the US came online, limited by falling bond yields with the 5-year yield at a fresh record low of -0.06% while the 10-year yield dipped to 1-month lows.
UK chief Brexit negotiator David Frost confirmed that next week's talks would be smaller , face-to-face and more focussed. He added that the UK didn’t want to undermine the single market but reiterated that national sovereignty was not up for discussion and rejected any EU reprisal measures. An attempted Sterling rally into the US open fizzled out
Sterling attempted to rally into the New York Open, but momentum faded and it failed to hold above 1.2450 on the Dollar and the Euro defended the key 1.1111 level.
US initial jobless claims declined to 1.48mn in the latest week from 1.54mn previously, although this was above consensus forecasts of 1.30mn. Continuing claims declined to 19.52mn from 20.29mn which suggested there had been further limited success in returning to work or finding new jobs, but claims remain extremely high.
Durable goods orders rebounded 15.8% for May following the revised 18.1% decline for the previous month and well above consensus forecasts of 10.9%. Underlying orders increased 4.0% for the month after an 8.0% decline the previous month.
The final first-quarter GDP reading was unchanged at -5.0% with consumer spending declining 6.8% while the trade deficit widened on weak exports.
The dollar overall held firm however confidence in the US fundamentals weakened further. This was offset by potential defensive demand given unease over the global risk profile amid nervous market conditions.
The Euros two-day decline against the Dollar has stalled with the buying tone around the US currency weakening amidst signs of risk reset in equities. The pair are currently trading just above the 1.1210, having printed a low of 1.1190 during Wednesday's US trading session.
ECB minutes from the June meeting stated that monetary policy measures and fiscal response had reduced downside risks. The minutes reiterated that the bank was ready to adjust all instruments as necessary and that the PEPP emergency bond-buying programme was proportionate to counter serious risks to price stability. Council member Mersch stated that PEPP must remain a temporary crisis instrument and that the full amount might not be needed if market tensions eased sufficiently.
The Euro will likely continue taking cues from the broader market sentiment this morning as ECB President Lagarde speaks at the Northern Light Online Summit, where she will likely reiterate the central bank’s willingness to provide additional stimulus and stress the need for more effort on the fiscal front.
Data to watch
07:00 - EUR - ECB President Lagarde Speaks
12:30 - USD - Core PCE Price Index
12:30 - USD - Personal Spending
14:00 - USD - Revised UoM Consumer Sentiment
Posted in Daily Market News on Jun 26 2020